Rising Days on Market

One fairly consistent trend that has been occurring in many local markets in recent months has been a rising average days-on-market (DOM) figure.  Home prices have been shaky, with NAR showing 5.1 percent lower prices in the first quarter of this year compared to last year and Case-Shiller showing 3 percent lower prices in the first two months of this year.  These two events appear to go hand-in-hand.

Without doubt, some home sellers need to get realistic about how to properly price their homes to attract buyers.  However, we should be mindful of the statistic trick that days-on-market can play.  Consider also another recent fact showing a fewer number of newly listed properties.  That is, of the total existing inventory, an increasingly large percentage of homes are not new listings, which naturally have a very low DOM number.

DOM050211

In the table above, it becomes clear that the average DOM could easily, and in fact is more likely to, be higher in the second row even though the raw inventory numbers would imply healthier market conditions.  So the average DOM can mislead market observers.

A better measure of the supply-and-demand condition in the market is the total inventory in relation to sales.  That is what is captured by the statistics on months-supply of inventory.  Furthermore, the months-supply figure is not subject to any potential manipulation of changing listing status (e.g., delist, wait, then relist as brand new) because it only counts how many homes are listed and not how long properties have been listed.  The latest months-supply at the national level is at 8.4 months.  That is about the same as last year’s figure at this time of the year when the market was artificially juiced up with the homebuyer tax credit.  The latest months-supply figure is also lower than the 10 to 12 months-supply conditions during the second half of last year.

The lower home price of those transacted homes is partly due to more distressed property sales.  But as distressed property sales thin out over time, prices will likely show stabilizing patterns.

The bottom line:  DOM for an individual property is very important and re-pricing will be necessary at some point if the property’s DOM rises.  However, an average DOM figure for the market as a whole may not be a good indicator about how to price the home.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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Comments
  1. I would have to agree with that outlook. As properties are quite often “re-listed” improperly or erroneously. If a property is removed from the system properly, and timely, the actual data of supply would suggest the correct and appropriate days on market. I use ADOM/DOM data as a means to determine a pricing and terms strategy for a buyer. On the listing side, the listing agent should use this data to feed the seller a monthly strategy for selling at an appropriate level depending on the market cycle, i.e. buyers or sellers market. Most don’t try or rather they don’t understand how to approach the seller with this information and adjust accordingly, mainly because they are afraid the seller will pull the listing. I’d prefer that unrealistic seller pull the property, or I will drop it because it costs too much for me to carry it, unless of course I’m getting tons of leads for buyers, but then the ethical thing is to make sure you convey that information as well. Mr/Mrs Seller, I’m getting tons of calls on your house (never a home to the seller – always a house or property – homes are for buyers/future owners) but they are looking elsewhere because they feel the home is just over the limit for the … (fill in the blank here). If this is the case, which it should be, then they have evidence that their pricing point is incorrect and should reflect the shift immediately. Then use those leads to try to get them inside and close a deal. If this strategy by agents is used more often we’d see lesser DOM’s because pricing is no longer an issue, if however we don’t see a drop in DOM we have a whole different problem on our hands regarding available money.

  2. David DeRosa

    I have a question regarding homeowners that abandon the sale process due to the extended DOM or other reasons. I am doing some analysis – trying to understand those that intend to move; how many actually move and how many don’t. My gut tells me that 15-30% give up. Is there any data to back up my guesstimate?

    I understand that this fluctuates – for my analysis I am focued on the past 12 months.